Editor's Note: It is especially interesting this was published in the St. Cloud Times, a newspaper that has traditionally opposed municipal liquor.
By Kari Petrie, St. Cloud Times
While shoppers might see it as a convenient place to pick up beer and wine, cities rely on municipal liquor stores to fill the budgeting gap.
In 2010, 209 Minnesota cities operated 242 municipal liquor stores. In Central Minnesota, Sauk Rapids, Paynesville, Princeton, Holdingford and Gilman have their own stores.
Last month, Sauk Rapids purchased land for a possible second liquor store. Other cities have found that expanding their stores and updating their offerings has raised revenue.
The St. Cloud Times reviewed financial information from area municipal liquor stores and found that they are all making a profit - some just a few thousand dollars, others nearly $200,000 a year. That money has gone to public improvement projects, paying off debt, and buying new squad cars, among other things.
But some think owning a liquor store serves other purposes. It can stimulate development and gives local governments more control over alcohol sales.
"We're not in it just for the money," Princeton City Administrator Mark Karnowski said. "There is a control component that, in my mind, is at least just as important."
Filling gaps
In a time when city governments are seeing state aid cuts and declines in property tax revenue, income from a liquor store can help pay for projects that might otherwise be left undone.
Sauk Rapids uses the profits from its store to buy equipment such as squad cars and backhoes for the public works department. In 2011 the city made about $97,000.
Sauk Rapids City Administrator Ross Olson said the liquor store funds allow the city to make large purchases and keep the tax rate down.
Paynesville has used liquor store profits to pay for sidewalk projects and put money into the city's general fund, City Administrator Renee Eckerly said.
In 2011 the city made about $7,000 but that number is skewed because of costs associated with moving into a new building. In 2010 it made about $74,000.
While some of the money the Princeton store makes goes into the general fund, most of it goes to community projects. In 2011 Princeton made about $184,000.
"We try to use the money for positive projects in the city that we otherwise wouldn't have the money to do," Karnowski said.
The city has used money to put in a splash pad and is looking to use liquor store funds to build a new public safety building.
But Karnowski said having a city liquor store is about more than having another revenue source.
"Having some control over the sale of alcohol is a good thing," he said.
Cities that have private businesses sell alcohol don't have as much control when laws are violated. If a business sells alcohol to a minor, the city is limited in what sort of action it can take against the business.
But if a city employee working at a city liquor store sells alcohol to a minor, the city has more control over what can be done.
The Holdingford liquor store hasn't been as financially successful as others. In 2011 it made just $2,300. Its profits go into the general fund.
While some residents have talked about whether to keep it open, City Clerk Vicki Statz said others feel the store is an important part of the city.
"It's been a staple in town," she said.
Plans for expansion
As Sauk Rapids grows and anticipates new development, officials have begun discussions about whether to build a second liquor store.
Last month, the city purchased land at Golden Spike Road and Industrial Boulevard for $375,000. For years Sauk Rapids has discussed putting a second store near that location.
Timing worked for the city. The developer offered to sell the land in a deal that officials hope will help spur new development.
"It doesn't mean we'll build a new store today," Olson said. "It means we can secure the property today."
As part of the purchase agreement, $100,000 will be set aside to go toward the construction of a building on another vacant lot in the development.
The money can be used to build a retail, restaurant or office commercial building. The $100,000 will be available for two years.
A 2007 market analysis said a second liquor store would be successful in that area if there was a big-box retailer nearby. Olson said that study needs to be updated before they can move forward.
The city will also wait and see what other sort of development takes place at the U.S. Highway 10 and Golden Spike Road corridor.
It was announced last month that Benton County has received a $2.9 million federal grant to do interchange improvements at the corridor. The total project will cost $4.9 million.
Officials hope that project will facilitate further economic development in the area.
Expansion success
While Sauk Rapids debates the future of its store, other cities have had success with expanding and updating their offerings.
In 2006, Princeton built a new liquor store and saw its profits go up. The income jumped from just over $93,000 in 2006 to more than $253,000 in 2007.
Before building, the city researched other cities that recently expanded to see if it was worth the cost. Princeton eventually decided to build a new store three times the size of the old building, which offers more storage and helps to meet customer demand.
The store was put into a location that was open for commercial development. Karnowski said there was concern about whether people would come to the new store since the old one was in the center of town.
"Currently if people want to buy from us, they have to go out of their way," he said.
But the store has been successful. And in the fall a Walmart will open next door to the store.
"That additional traffic will help us out tremendously," Karnowski said.
Last year Paynesville moved its store into a new space. A credit union wanted to buy the city's old building so the city now leases space at a new location, Eckerly said.
Moving into a new location is one of several changes the city made in the past three years that has helped boost sales. Council members have discussed closing the store if they could not increase profits, she said.
In 2008 the store made $15,600 while in 2010 it made nearly $74,000.
Other changes included investing in a better records management system that made it easier to follow how business was going. That system led the city to change the store's hours so they were open only during profitable times.
The store also has created new promotions, such as a wine club and a beer camp. Each one attracts dozens of attendees, Eckerly said.
The tone of the store has changed. Instead of being a place to pick up a six-pack, it's now a destination with a better shopping experience, she said.
"It's a fun place to come into ... If it didn't turn around, we wouldn't have it anymore," she said.